2024-01-02 13:09:54
Ouribank presented its assessments of the main indicators of the Brazilian economy in 2024, adopting a more optimistic view compared to the market. The exchange rate, for example, might be below the US$/R$5.03 forecast in the Central Bank’s (BC) Focus Report, said the financial institution’s economist, Cristiane Quartaroli, in a press conference last week (19/ 12).
When looking at data from the external sector, it was observed that both the flow and the trade balance grew in 2023 and this was not reflected in a drop in the exchange rate throughout the year. Therefore, it is to be expected that at some point this impact will happen and be positive for the evolution of our currency.
According to the economist, the factors that prevented a better exchange rate were concerns regarding fiscal policy, domestically, and the performance of central economies, with inflation and rising interest rates. “They brought caution, uncertainty and risk aversion, reflected in the exchange rate. However, the expectation of less contractionary monetary policies around the globe in 2024 tends to be positive for the Brazilian economy.”
How are inflation, Selic and GDP
In Quartaroli’s analysis, inflation should be closer to the next target in 2024, being slightly below Focus’s expectation of 3.93%. Lower inflation tends to have a positive impact on our basic interest rate. “Selic might be below the 9.25% projected for the year ahead. In this way, the Gross Domestic Product (GDP) tends to grow more than the 1.51% also projected by the market.”
A minutes of the Monetary Policy Committee (Copom) of the BC released this week brought a more positive tone in relation to the internal and external scenario, she assesses. “The BC understands that core inflation is converging towards the target, although it has not signaled an increase in the pace of Selic adjustment, due to fiscal and external risks.
Slowing inflation, lower interest rates and better employment and income rates might influence the increase in family consumption; and result in a more robust expansion of the Services sector, in 2024, since this important area of the Brazilian economy showed more timid growth this year. The Tax Reform, a major advance for Brazil, in Quartaroli’s opinion, tends to have a positive impact on the industry’s performance. Other highlights that favor optimism for 2024 are the improvements in both consumer and business confidence indexes, which are important for boosting consumption and investments in the future.
Attention points
If, on the one hand, data on work, income and confidence are indicative of economic growth; on the other, they turn on a yellow light, which is the increase in consumption and possible future pressure on inflation, warns the Ouribank economist. Not surprisingly, the BC is more cautious regarding announcing an increase in the pace of Selic reductions in 2024, she said.
Fiscal policy will also deserve more attention next year. “The fiscal issue brought a lot of volatility to the financial market in 2023, which might continue next year because the current government has a more expansionist profile and the market is very concerned regarding this.” The forecast of a lower GDP in 2024 than the 2.92% projected for this year also indicates lower revenue, with expenses that may not keep up with this pace. “Thus, the account may not close and the zero deficit projection for 2024 will not come true.”
Quartaroli highlighted, however, that the Minister of Finance, Fernando Haddad, has signaled his commitment to fiscal policy, with the goal of reducing the deficit and that the government has been working to improve revenue collection. “The approval of the Tax Reform is a positive sign. The country took an important step throughout 2023, but there is still a lot to be done, and the measures will take a while to reach the real economy.”
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